Own a home before investing?

Question

Hi BP members,

As I am new to this site and attempting to suck up as much information as I can, I had a quick question! Is it advised to own your own home before you begin investing in a property?

Jon Huber · Answer

@Trenton Irons  Why not both? You hear a lot about "house hacking" here. You can use an FHA loan to purchase your first house, and have it be a duplex, triplex, or quad. Rent out the other units and live for free. It's just an option...

Jeff Rabinowitz · Answer

I wouldn't do it. Then again, I live in an area that offers an abundance of deals within miles of my home. I have met investors who have always invested out of state and have done very well. I have also met investors who have had very poor results doing so. If you plan on investing out of state you must take the time to learn the area well yourself and also find locals you trust to do the jobs that must be done in your place. A combination of the two is the best approach.

Jeff Rabinowitz · Answer

You certainly don't have to own a home before investing. The best thing about owning your own home from an investor's point of view is that you get to learn how houses work and what maintenance they need.  If the $120K won't buy much where you live you can buy somewhere else. If you go that route make sure you connect with locals in the area who you trust implicitly because you will be relying on them to advise you on major decisions.

Account Closed · Answer

i think it really just depends on your personal situation.  There are many ways to get into real estate and it changes based on your situation and goals.  I would advise to first figure out what your goals are and work from there.  There is no right answer and there are many options to entertain it's just a matter of figuring out what would work for you and what is feasible with your financial situation. Lots of good advice so far.

Account Closed · Answer

Thank you Vanessa! I will shoot him a message and see what I can learn from him.

Account Closed · Answer

Thank you, Jeff. I will take that into consideration. If you will allow me to pick your brain, I was under the impression that investment out of state for a first deal was a bad idea?

Account Closed · Answer

Hi Jon,

Thanks so much for the response! I have heard about the FHA loan option in relation to duplexes and multi family homes. However, I don't think that this option will be feasible because I am in the SoCal area and I am only eligible for about a 120k loan using standard financing options. Are there any other options you might have in mind for me to dip my feet into the REI pool? 120k in SoCal won't get you much.

Trevor Ewen · Answer

Account Closed

I think the 'own your primary first' approach is hardest to swallow in the high-cost metro areas. Southern California, SF, New York, DC... it will tie up an incredible amount of your net worth just to pay the money down. On top of that, your 'investment' is tied to super tenant friendly laws, and low rent-value ratios. It's the same story in each of these towns...

I advise the approach of getting value for your money. If you are 100% certain you are making a life for yourself (15 years+) in SoCal, then buying is a good way to lock-in your cost of living. If you are open to a move, choose the market that works for returns and see where real estate investing is able to take you.

Jo-Ann Lapin · Answer

I totally agree. It the perfect forum to learn many aspects about owning, managing and ivesting in real estate.

James Brand · Answer

Completely agree with @Ali Boone here, your own home is more of a liability in my mind. It does not generate revenue. You could make the case that the tax benefit of being able to deduct your interest is an advantage but unless you have roommates or renters (house hacking) it is not an investment. It could appreciate sure, but to be investing solely for appreciation is speculative.

Some really great insight above though. Read and learn and I am sure you will develop your own strategy. Set goals.

Goof luck!

-James

Own a home before investing?

Most Popular Reply